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At the heart of optimistic investment strategies in renewables and clean energy infrastructure is a basic dilemma: Moving electricity from wind and solar farms or other renewable sources requires storage to balance out intermittency in the electrical grid. Many solutions exist in theory, but lithium batteries have emerged as the solution of choice at scale. And, of course, lithium batteries are at the heart of the exploding electric vehicle (EV) industry, from Tesla’s plant in California, Toyota’s in Japan, to the massive expansion of China’s EV production.
Shelley Goldberg, Founder and Principal at Invest-with-Purpose, helps clients define their ESG strategies, particularly in clean energy and other environmental resources.
With more than 25 years of experience as an institutional investment advisor, macroeconomic strategist and portfolio manager in all commodities including energy (traditional and renewable), metals and mining, and agriculture. She sees lithium as a commodity of the future, though its concentration in just a few producer states (Chile, Argentina, China and Australia) baked volatility into its price. So, too, does trade friction between the U.S. and China, whose mining firms control over 50 percent of the lithium market.
Goldberg’s views on the commodity and ESG space are highly sought after. Her work appears frequently guest on financial networks at global impact investment conferences. Goldberg spoke to Karma Contributing Editor Michael Moran.
Michael Moran: Shelley, let’s start with a primer on the importance of lithium in the clean energy space.
Shelley Goldberg: There’s a number of factors about lithium that are interesting. Basically lithium on its own is really nothing. It’s what it’s combined with. And the number one thing that it produces is rechargeable batteries and that’s really where the market is and why the demand for lithium is growing so much.
Right now we don’t really have a substitute, it’s not scarce but the issue is it’s very concentrated and very difficult to find and process. So therefore it makes it uneconomical to do it at a low price.
In 2017 it was $119 billion market. It’s expected to go to $567 billion by 2025. So that’s definitely a big issue here and that’s what’s keeping prices up pretty strong.
Michael Moran: We’ve had a lot of trade tensions between the U.S. and China of late. Is it possible that this market becomes distorted or even involved in shocks because of their bad relationship between the two producer and consumer nations are going to consume?
Goldberg: I think there is definitively concerns surrounding the issue of trade between the U.S. and China.
When you take lithium, for example, China produces relatively little lithium at home but a Chinese company by the name of Tianqi Lithium controls half the world of lithium. There’s restraints not only from an environmental standpoint but from a political standpoint, from a logistical standpoint. All these come into play and, just like oil, perhaps we have enough of it, or just like water, we have enough but it’s in the wrong place.
Our largest supplier is China or many of these rare earth metals, with a whole host of other metals including lithium. We really don’t know what’s going on with China and we do know that there are a lot of tariffs and this is making the market nervous. It’s creating higher volatility, but can China use it as a leverage in the trade war?
China is the fourth largest lithium producing country in the world. The number one is Australia, most recent numbers were eighteen point seven thousand metric tons. Chile 14.1, Argentina 5.5 and China only three. So even though they’re number four, they’re only producing 3 which is a pretty small market. So for using that as a leverage wouldn’t make sense because they’re the largest consumer in the world. They would be tremendously hurt if they couldn’t get that supply into their country. So again they shooting themselves in the foot.
China is leading the way EV demand, without a doubt. There’s a hundred and seventy two car companies in China looking at EV including the world’s largest which is BYD. Now everyone talks about Tesla, BYD is much bigger than Tesla and producing a lot more cars than Tesla.
So, bad idea, it enhances volatility, increases volatility, increases prices or potentially decreases a lot of commodities are coming down in price namely because of a lack of demand due to these kind of tariffs, that are being placed or potentially threatening to be placed on these commodities.